The SMAC revolution
Previously in this series, we discussed Dell’s (DELL) acquisition of EMC Corporation (EMC) in collaboration with its private equity firm, Silver Lake Partners. Now let’s look at the factors that led both companies to opt for this buyout.
With the advent and increased adoption of SMAC (social, mobile, analytics, and cloud), there’s been a remarkable shift in how data is stored and accessed. As a result, the market has shifted from computing with PCs (personal computers) to computing with mobile and cloud technology.
The increased adoption of tablets and mobile devices have eaten into PC sales, whereas cloud computing has provided companies a cost-effective way to buy and maintain their own software and hardware. As a result, computer servers, data storage, and networking gear are going through a sluggish growth phase. It’s no doubt that Dell, which is known for servers, and EMC, whose specialization lies in storage and virtualization, are going through a rough phase. The table below shows the biggest deals in the technology sector since 1995.
Storage space restructuring
Symantec Corporation (SYMC) leads the backup and recovery software market with 30% of the market share, according to Gartner. It’s followed by EMC and IBM (IBM), which have 18% and 17%, respectively, of the market share.
In August 2015, EMC was forced to consider a buyout by its own subsidiary VMware (VMW) or else break up its federal structure in order to unlock shareholder value. On August 11, 2015, Symantec’s information management and data storage business, Veritas, made headlines when The Carlyle Group announced its acquisition for $8 billion. Meanwhile, the Hewlett-Packard Company (HPQ), another leading player in storage space, also is on the breakup route. So it seems that a way of restructuring has engulfed the IT (information technology) space, especially storage space.
You can consider investing in the PowerShares QQQ Trust (QQQ) to gain exposure to the technology sector. The ETF invests about 54% of its holdings in the technology sector.
In the next part of this series, we’ll look further into comparable deals in the technology sector while going deeper into the Dell-EMC deal.